How to choose the right lender when you have decided to refinance your home? After all, you’ve worked out the numbers and they indicate that refinancing would be an advantage in your case: you’d have lower monthly payments, pay less interest in the long run, or maybe just pay a little more for cut more than a decade off your loan term. All you have to do is get that new mortgage.

To get your loan, of course, you need to find a lender. While going to your local bank and applying for a loan can help you achieve your goals, putting in a little more effort to find the right lender will likely be time well spent as it can earn you money.

Find the right lender

Banks and credit unions are the two entities that most often come to mind when homeowners think about obtaining financing, but they are not the only potential sources of lending. Consumer credit companies, savings and loan institutions and other specialized credit companies also offer mortgages. Taking the time to choose the right lender can make a big difference in the amount of money you’ll spend on fees to get a loan as well as mortgage interest over the life of the loan.

Loan officers and mortgage brokers

As you begin your search for a lender, keep in mind that loan officers, who represent the banks, credit unions, and other financial institutions they work for, are paid in part based on the transaction you you perform. That doesn’t necessarily make loan officers bad people; it just means you should do a bit of work on your own to make sure you get the best deal. It is therefore important to understand the full variety of options available and the pros and cons of each.

Mortgage brokers do not work for lenders but rather act as an intermediary between you and the lender and can help you compare the services of many lenders and work to secure you the best rate. They are sometimes paid by the borrower (i.e. you) to help find a mortgage and facilitate the loan origination process, but more often they are paid by the lender in exchange for the bringing business to this lender.

Like loan officers, making a sale is how they get paid. Again, a little knowledge and some comparison shopping might serve you well. And as with many traditional financial services, several online tools are now available to help you avoid brokerage fees.

Mortgage Lender Comparison: Cost

The key things to consider when selecting a mortgage lender are costs and services. Understand the terms of your loan – the amount of the monthly payment, the number of years until it is paid off, the interest rate, the fees and whether or not a penalty is applied if you repay the loan longer early – will give you an overview of the miscellaneous charges. Conversations with your potential lender or mortgage broker and a review of the Good Faith Estimate (GFE) provided by the lender will allow you to make a reasonable comparison.

The Good Faith Estimate is a legally mandated document designed to protect borrowers by requiring lenders to provide standardized disclosure of costs associated with a loan. This written estimate details the fees you will need to pay at closing, including the cost of all points, processing, legal fees, and filing and closing costs.

Although the law does not dictate the price each lender charges for the various services they offer, the Good Faith Estimate provides a useful tool for comparing purchases. A lender may charge more for legal fees and less for filing fees. Another may have lower overall fees but charge a higher interest rate. Using a mortgage calculator is a good resource for budgeting for these costs.

Careful consideration of the good faith estimates of the lenders you are considering will help you find the best deal.

Comparison of mortgage lenders: service

On the service side, getting quick and accurate answers to your questions is an important part of the process. Getting a loan requires a lot of paperwork, as well as the collection and dissemination of a significant amount of personal information. Having a single, reliable point of contact for your questions can mean the difference between a smooth and easy process and a difficult experience.

Having the loan ready in time for your closing is another important consideration. Final documentation is often only available days or even hours before closing, and coordinating the schedules of the various parties involved in the transaction can be a challenge. A reliable lender will help you keep everything on track and on time and make a significant contribution to your personal peace of mind.

There was a time when researching and gathering the information you needed to refinance was a time-consuming process that required visits to multiple lenders or hours on the phone. While these traditional options are still available, technology has helped make the process much easier. You can go online and find convenient ways to compare lenders and get an overview of the range of interest rates available for the loan you’re looking for.

The essential

Refinancing your mortgage can, under the right circumstances, be a financial boon to add extra savings to your wallet. Before you jump into the process, however, you need to fully understand refinancing to make sure it’s right for your particular situation.

These steps involve deciding whether to use a loan officer or mortgage broker, selecting a lender, calculating costs, and determining who will provide the best service. Fortunately, online resources make the job much easier today than before. So take control of the process and see what you could save.